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LONDON, March 11 (Reuters) - Britain's goods trade gap with the rest of the world widened more than expected in January, as a 16 percent fall in exports to countries outside the European Union outstripped a rise in exports to Europe.
Britain's goods trade gap widened to 7.745 billion pounds ($10.7 billion) in January from 7.232 billion pounds in December, above analysts' forecasts for a deficit of 7.45 billion, the Office for National Statistics said on Wednesday.
The goods trade gap with non-EU countries also widened more than expected to a record 5.704 billion pounds from 4.340 billion in December. Analysts had forecast a deficit of 4.25 billion pounds.
However, exports to EU countries rose nearly 6 percent, cutting the trade deficit with Britain's biggest trading partner to its narrowest since August 2003 at 2.041 billion pounds.
The figures suggest the pound's weakness may be helping boost exports to European countries, but demand for British goods from further afield has fallen sharply as the global economic downturn gathers pace.
The ONS said the fall in demand from non-EU countries was widespread across manufacturing.
Policymakers have been hoping that Britain's weakening currency would provide a boost to exports and the economy as it endures its first recession in nearly 20 years.
"Overseas demand is collapsing and even though the pound is weaker, it's overseas demand that dominates and that is likely to be the case for several months to come," said Alan Clarke at BNP Paribas.
The Bank of England is so concerned about Britain's economic prospects that it has slashed borrowing costs to a record low of 0.5 percent and will later on Wednesday start buying gilts with newly-created money in an effort to boost demand.
The National Institute for Economic and Social Research estimated on Wednesday that Britain's economy shrank by 1.8 percent in the three months to February. Official data earlier this week showed manufacturing output in January fell at its fastest annual rate since 1981.
"The weakness of global demand appears to be delaying the much-hoped for rebalancing of the economy," said Vicky Redwood of Capital Economics. (Editing by Mike Peacock)